The federal government has repeatedly been warned to make companies tell investors what executives actually take home in pay but has failed to act, experts say.

Investors’ anger over the executive pay loophole follows revelations that
Aquila Resources
chairman
Tony Poli
received a $328 million bonanza from his 2005 options package despite his reported annual pay being only $572,000.

“The government has had CAMAC [Corporations and Markets Advisory Committee] and the Productivity Commission examine the issue and make specific recommendations on the issue of disclosure of executives’ take-home pay but yet they continue to sit on their hands while investors are left in the dark," CGI Glass proxy advisor Lewis Aaron Bertinetti said.

Research head at proxy adviser ISS Daniel Smith said Mr Poli’s pay, revealed in an executive survey by the Australian Council of Superannuation Investors, was “eye-popping".

“At the same time, let’s not forget that Aquila had less than $1 million in revenue in 2005, none of which came from gold sales," Mr Smith said.

“It was still very much a speculative company – shareholders invested at their own risk. Poli did make money for shareholders – his options didn’t vest until the share price had appreciated over 40 per cent. And a lot of investors made heaps from Aquila," he said.

The head of the Australian Shareholders’ Association, Vas Kolesnikoff, said boards knew there was a difference between take- home pay and disclosed pay, the latter being an accounting number. “Why don’t they disclose both the accounting number, which includes cash, rights, options and shares, and then the ‘actual’ pay."

Michael Robinson of Guerdon Associates said of Mr Poli: “Good on him. It is the way that options are intended to work. The results are really aligned with shareholder outcomes, so if shareholders make a lot of money, so do the executives."

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Aquila’s share price was $3.45 in September 2005 when Mr Poli was awarded 5 million options. By the time they vested, in June 2008, the underlying share price (allowing for bonus issues) was $50. Mr Poli’s options were worth $238 million and his total holding was $1.48 billion.

Other shareholders also benefited as the market value of the company touched $4.3 billion.

By the time Mr Poli exercised the options in December 2010, his profit had dipped to $169.4 million. But he did not sell the shares and today they are worth $52.7 million.